ISM Non-Manufacturing Prices

The ISM Non-Manufacturing Prices Index, now the Services Prices Index, tracks input prices paid by U.S. services organizations for materials and services. It comes from the Institute for Supply Management (ISM), which surveys purchasing and supply executives. It covers 18 service industries, weighted by each industry share of GDP, for U.S. operations only.

It is not consumer inflation, manufacturing activity or a regional survey. A reading above 50% means price increases were more widespread. The index shows breadth of change, not how much prices rose.

ISM sends the survey in the first part of each month and collects replies through most of the month. Respondents compare the month with the previous month for U.S. operations only. ISM posts results after 10:00 a.m. ET on the 3rd business day of the month.

Each release includes the composite index and sub-indexes, plus commodity moves, industry lists, quotes and method notes. The composite combines 4 inputs: Business Activity, New Orders, Employment and Supplier Deliveries. Replies are raw data and are never changed, while seasonal factors are reviewed each year. Each index uses direction words such as increasing, slower or contracting.

Read Prices with demand, capacity and commodity clues, since input costs rise for many reasons. The survey tracks several parts that help explain pressure. Commodities up or down in price are recorded each month.

• Business Activity: current-month services output and a composite input.
• New Orders: incoming demand for services and a composite input.
• Employment: hiring direction across services and a composite input.
• Supplier Deliveries: delivery speed, where above 50% means slower deliveries.
• Prices: prices paid for materials and services, the subject of this page.
• Other indexes: Inventories, Backlog of Orders, New Export Orders, Imports and Inventory Sentiment.

A high reading can coincide with slower activity, since it measures cost pressure rather than growth. Broad increases across industries signal widespread pressure even when demand softens. That is why markets read Prices with activity, orders and hiring.

1. Collect replies: record the share reporting higher, same or lower prices for the month versus the previous month.
2. Apply the diffusion formula: add the higher share plus 0.5 times the same share, since lower replies add nothing. One illustrative split was 75.4% higher, 24.4% same and 0.2% lower, giving 87.6% before adjustment.
3. Adjust and weight: seasonally adjust the result to remove repeating yearly effects from weather, holidays and calendars. Only 4 indexes receive this treatment, including Prices, and industry replies are weighted by GDP share. The illustrative raw 87.6% was published as 84.6% after adjustment.

A high or rising reading does not mean consumer prices rose by that amount or that growth sped up. It shows how widespread input cost increases are across U.S. services.